Borrowers seeking a mortgage to purchase or refinance a home must be approved by a lender in order to get their loan. Lenders underwrite loans based on a variety of criteria including income, assets, credit score, and more. Importantly, banks will need to verify the financial information that you provide to them. In some cases, your lender might call your bank to verify your bank account and statements. Most lenders, however, fill out a proof or verification of deposit (POD/VOD) request forms and send them to your bank to verify your account. Many banks provide downloadable VOD forms for lenders on their websites.

Key Takeaways

  • Mortgage lenders require financial information from potential borrowers when making their decision whether to extend credit.
  • Deposits held at a bank are a key factor for underwriting a mortgage.
  • Proof of deposit is a special type of requests that lenders ask of depositary institutions to verify the account balances of applicants.
  • Mortgage lenders will also require POD to show that the borrower has sufficient funds to pay the down payment for a property.

Types of Information Verified

When buying a home, the mortgage lender may ask the borrower for proof of deposit. The lender needs to verify that the funds required for the home purchase are accumulated in a bank account and accessible to the lender.

During times of tight credit, the lender may also want to see evidence of how the funds came to be deposited into the bank account and where the money came from. This is because certain lenders place a limit on the amount of gift money that can be used as a down payment on a house.

A lender that submits a VOD form to a bank gets confirmation of the loan applicant’s account number, whether the account is open or closed, the date when the account was opened or closed and the type of bank account being verified, such as savings, checking or money market. The bank also confirms the account balance as of the date of the request. The lender might request confirmation of the average balance over a two- to three-month period and the balance at the time of closure, if the account is closed. Banks send VOD confirmations to lenders via fax or mail.

Some lenders may have additional requirements for proof of deposit. Some may request copies of bank statements or a letter from the person who provided any gift money that has been deposited into the account. A lender may also want to see proof of several months of cash reserve on hand in another account to ensure the borrower can still pay the mortgage if they lose their income stream.

When dealing with deposits into an account, the proof of deposit process follows after checks have been separated by a sorting machine into either an "on us" category or "on them" category. This proof of deposit procedure is called "check proofing" and is done after the routing and account numbers have been recorded by the sorter. Without adequate proof of deposit, a lender may refuse to finalize a mortgage or allow a potential buyer to use the funds from the account to pay closing costs on a property.

Lender’s Perspective

Lenders have the discretion to request your bank statements or seek VOD from your bank; some lenders do both. Lenders that use both VODs and bank statements to determine mortgage eligibility do so to satisfy the requirements of some government-insured loans where the source of down payment funds must be known for mortgage approval.

Some consumers may wonder if asking their lenders to verify their deposits rather than review bank statements will help them hide blemishes such as overdrafts. Lenders reviewing bank statements typically dismiss rare overdrafts, but a consumer with numerous overdrafts within the two- to three-month period before closing on a home will most likely be viewed as risky.